Gold Hits Record High After Fed Warns of Slower U.S. Growth
Gold steadied after hitting a record high earlier in the session on projections of slower U.S. growth and higher inflation this year from the Federal Reserve, which kept interest rates unchanged.
Bullion peaked above $3,057 an ounce, a day after Fed Chair Jerome Powell acknowledged the high level of uncertainty over President Donald Trump’s policy changes but said the central bank was in no rush to adjust borrowing costs.
Powell said his base case was that any increase in inflation driven by tariffs would be “transitory,” but later added it would be very challenging to say with confidence how much of that inflation would come from tariffs versus other factors. He also said the chances of a recession have increased, though not high.
Gold has risen 16% since January in a rally that has seen it hit a series of all-time highs so far this year, extending last year’s strong run as investors flocked to the precious metal for safety. Several major banks have also raised their bullion price targets in recent weeks, with Macquarie Group predicting it could rise to $3,500 an ounce.
Spot gold was steady at $3,046.75 an ounce at 7:11 a.m. in London, having risen more than 2% over the previous three sessions. The Bloomberg Dollar Spot Index was little changed. Silver, platinum and palladium all fell slightly.
Despite the upgrade in inflation forecasts, the bond market took advantage of the fact that U.S. growth forecasts were cut — validating some concerns that Trump’s trade war and spending cuts would cool the economy. Fed officials continue to forecast a half-percentage point interest rate cut this year.
In China, meanwhile, the tone is increasingly cautious. The state-run China Securities Journal warned that investors should be cautious with gold as prices are likely to be volatile ahead.
Source: Bloomberg
